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Friday, February 28, 2014

Beware of the Blown Whistle 

Endo Health Solutions Inc. promoted Lidoderm adhesive pain-relief patch for treatment of chronic pain stemming from carpal tunnel syndrome, diabetic neuropathy and other conditions, claimed the federal government and several employee whistleblowers in federal court lawsuits. Lidoderm had only been approved by the FDA to treat complications of shingles.

Last week Endo agreed to pay nearly $193 million to settle civil whistleblower claims and criminal allegations that off-label promotion (promoting the drug for uses other than that for which it has been officially approved) induced health care providers to submit false claims for reimbursement to Medicare, Medicaid and other federal programs. The employee whistle blowers received substantial qui tam (when a private individual who assists a prosecution can receive all or part of any penalty imposed settlements) as well. The lead case is Ryan v. Endo Pharmaceuticals Inc.

Three days later Doshi Diagnostic Imaging Services PC agreed to pay $15.5 million to settle False Claims Act claims that it fraudulently billed Medicare and Medicaid for tests that were not performed or were unnecessary. According to the federal court complaint, Doshi repeatedly directed its employees to alter the reports of Doshi’s radiologists by adding fabricated information indicating that the radiologist had found the much more expensive color Doppler procedures medically necessary to their interpretation of the patient’s diagnostic images. According to the settlement documents, Doshi will pay roughly $1.1 million to three whistle blowing employees. The case is U.S. v. Doshi Diagnostic Imaging Services.

Common Sense Counsel: Any company which accepts federal funds is open to a False Claims Act (FCA) lawsuit initiated by the federal government or a whistle blower employee filing a qui tam action. Whistle blowers are financially incentivized to bring suits against individuals or businesses that knowingly submit false claims for payment to the federal government earning up to 30 percent of any amount recovered. ObamaCare has it own whistle blower protections.

A business or healthcare provider can inoculate itself from FCA claims by taking these 4 steps: 

1) Make smart and informed hiring decisions. You may be exposed to liability due to the actions of a partner who has engaged in past patterns of fraudulent or criminal behavior. Opportunistic employees who filed past lawsuits may also position themselves as whistleblowers.
2) Well drafted FCA policy and regular training. Policy signoffs and employee orientation repeated during annual training programs are good ways to ensure all levels of staff understand and remain clear of their own ethical obligations and potential risks of failing to comply.
3) Routine good faith audits. The most effective way to avoid FCA liability is with routine and detailed good faith internal audits. Audits should be performed by an outside firm which demonstrates a commitment to compliance and can be useful in defending any future false claim allegations. Cloaking those under the attorney client privilege is always wise counsel.

4) Have a response plan. If an employee blows an internal whistle, take immediate steps to investigate and address the claim. Responding to allegations and prompt correction of errors is likely to help avoid more serious liability. If the investigation reveals a pattern of improper claims, billing for a ghost patient or procedure, or intentional upcoding, a more formal audit should be conducted.

Tommy Eden is a partner working out of the Constangy, Brooks & Smith, LLP offices in Opelika, AL and West Point, GA and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at or 334-246-2901. Blog at